EURCHF is hovering around the 0.9706 level, a tad below the rectangle that has been dominating the price action since October 13, 2022. However, as the price move following the recent bearish breakout has been very weak, there are increased chances of a rebound back inside the rectangle. That would potentially be significant from a short-term momentum perspective.
With the Average Directional Movement Index (ADX) stuck below its 25-threshold and signaling an entirely range-trading market, the focus turns to the stochastic oscillator for some sort of guidance. Interestingly, this indicator appears to bounce off its moving average, a potential bullish signal.
Should the bulls decide to push the market higher, they would have to overcome the 0.9706 level set by the November 14, 2022 low. The path then looks trickier as the various simple moving averages (SMAs) occupy the 0.9777-0.9855 area along with the 38.2% Fibonacci retracement of the June 9, 2022 – September 26, 2022 downtrend.
On the other hand, the bears are keen on staging a proper move lower to negate any thoughts of a false breakout. The first test comes at the 0.9650-0.9665 area defined by the January 15, 2015 low and the 23.6% Fibonacci retracement respectively. Even lower, the next key resistance might come at the 0.9403 area.
To sum up, the much-expected bearish EURCHF breakout has not delivered a sizeable correction, increasing the chances for a strong upleg.
